loss mitigation strategies for port...
TRANSCRIPT
AAPA Marine Terminal
Management Training Program
Renaissance Baltimore Harborplace Hotel
Baltimore, Maryland
September 19, 2012
LOSS MITIGATION STRATEGIES
FOR PORT AUTHORITIES
Rhonda D. Orin [email protected]
(202) 416-6549
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©2012 Anderson Kill & Olick, P.C.
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Disclaimer
The views expressed by the participants in this program are not those of the participants’ employers, their clients, or any other organization. The opinions expressed do not constitute legal advice, or risk management advice. The views discussed are for educational purposes only, and provided only for use during this session.
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©2012 Anderson Kill & Olick, P.C.
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I. Meat and Potatoes
(Basic Maritime Primaries)
• Commercial General Liability
• Marine General Liability
• Protection & Indemnity (P&I)
• Legal Liability
• Hull Insurance
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Commercial General Liability
• Typical language: coverage for “all
sums which the Assured shall become
legally liable to pay or by contract or
agreement become liable to pay in
respect of claims made against the
Assured for damages of whatsoever
nature, on account of: (1) personal
injuries . . . ; (2) property damage . . .”
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Maritime General Liability
• Combines traditional CGL policies with
maritime liabilities. Designed to cover
land-based and maritime exposures.
• Language can vary, so policies should be
reviewed carefully at time of purchase.
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Protection & Indemnity (P&I)
• Broad coverage for both personal injury
and property damage associated with
virtually all operations of a vessel,
exclusive of workers compensation
insurance.
• Covers liabilities to both the vessel and
the crew. Can include wreck removal.
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Legal Liability
Coverage for other people’s property in
the care and custody of the policyholder,
such as:
• Terminal Operators’ Liability
• Marina Operators’ Liability
• Shiprepairer’s Liability
• Stevedores’ Liability
• Wharfingers’ Liability
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Hull Insurance
• Coverage for physical damage to an
owned or chartered vessel, salvage
costs and limited property damage
(collision and towers’ liability) for the
operation of that vessel.
• Can include coverage for vessels under
construction (Builders’ Risk) and marine
inventory held for sale (Boat Dealers’
Physical Damage).
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II. Side Dishes
(Non-Marine Primaries)
• Auto: property damage to own vehicles;
bodily injury to third-parties.
• Property: covers buildings, yards,
boilers, business interruption.
• Inland Marine: covers mobile
equipment, such as cranes and lifts.
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Non-Marine Primaries (cont.)
• Liquor Liability
• Workers Compensation
• EPLI; EBLI (Fiduciary)
• D&O; E&O
• Foreign (Property, Liability, Auto, Comp)
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III. Doused in Gravy
(Marine Excess)
• Bumbershoots
• NOT the annual international music and
arts festival held every Labor Day
weekend in Seattle, Washington
• A colloquial term coined in the 19th
Century, as a combination of “umbrella”
and “parachute.”
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Bumbershoot Policies
• Excess of primary policies, providing
higher limits and filling in gaps.
• Stands over most of the primaries:
CGL, Legal Liability, P&I, Hull,
Commercial Auto, EPLI, etc.
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IV. High-Calorie Desserts
(Coverage for Excluded Risks)
• Flood Insurance: covers physical
damage to buildings and their contents,
if damaged by flood.
• Pollution Insurance: tailored coverage
for risks such as environmental
impairment at a site, underground
storage tanks, vessel pollution.
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V. Loss Mitigation Strategies
(Counting Your Calories)
1. Before or immediately after the loss,
when the loss itself can be mitigated:
Implicit or explicit loss mitigation
provisions in generic property and
liability policies.
2. After the damage has been done:
Individually tailored Loss Mitigation
Insurance (LMI) policies that control
policyholders’ financial exposure
based on previously occurring loss.
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Before the Damage is Done: Loss
Mitigation Provisions in Property Policies:
• Typically referred to as “sue and labor”
clauses.
• Impose a duty on policyholder to mitigate,
and a corresponding duty on insurance
company to reimburse policyholder for
mitigation costs.
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Before the Damage is Done: Loss
Mitigation Provisions in Liability Policies:
• Historically, liability policies less likely to
address loss mitigation explicitly, however
the doctrine of loss mitigation in the liability
context is well-developed.
• Potential coverage for mitigating measures
taken either before or after the liability-
creating event.
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Hoechst Celanese Corp. v. National Union Fire Ins. Co.,
Civ. A. No. 89C-SE-35, 1994 WL 721635
(Del. Super. Ct. Apr. 22, 1994)
• Costs of fixing potentially hazardous
plumbing systems before an injury
occurred was covered loss mitigation
cost even though actual damage had
not yet occurred.
• Coverage found despite lack of
explicit grant of coverage: loss
mitigation costs “are covered by
standard-form CGL policies such as
the ones at issue in this case absent
exclusionary language in the policy.”
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After the Damage is Done –
Loss Mitigation Insurance Policies
1. Initially became popular in late 1990s,
early 2000s.
2. Purpose of LMI is to provide insurance
coverage where a loss has already
occurred, but the extent of its financial
ramifications is still unclear.
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After the Damage is Done –
Loss Mitigation Insurance – Benefits
1. Allows risk managers to neatly
address long-term outstanding
litigation that, without LMI, would
produce great uncertainty (could
just as easily lead to millions of
dollars of liability as to no liability
whatsoever).
2. Helpful in context of mergers and
acquisitions – LMI policies
reassure buyers that a pending
loss will not potentially prove so
costly as to significantly lessen
the selling company’s value.
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After the Damage is Done – Loss
Mitigation Insurance – Benefits (cont’d)
1. Helps policyholder pay for
financially damaging loss via
steady, known premium
payments, rather than
unpredictable lump sum
verdicts/damage awards.
2. Policyholders may purchase
insurance to cover portions of a
damage award exceeding X
million dollars, giving
policyholder clear
understanding of maximum
possible exposure.
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General Tips When a Loss
Occurs or Is Threatening to Occur
1. Always seek to mitigate the loss, even if
question of coverage is not clear and you do
not hold a LMIP – better safe than sorry,
from business and insurance perspectives.
2. Always give insurance company early notice
of loss mitigation costs to be incurred.
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VI. CONCLUSION:
1. Assess your risks and purchase the policies
that you need.
2. Read them!
3. If a loss has occurred already, consider LMI.
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All Rights Reserved.
Thank You
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Rhonda D. Orin [email protected]
(202) 416-6549